UAE amends bankruptcy law to cover pandemic, debtors exempted in ‘emergency situations’

  DUBAI – The UAE Cabinet recently approved amendments to the bankruptcy law, allowing exemption of debtors who defaulted in their payment during “emergency situations”. Expatmedia.net spoke to Abdulla U.C., legal consultant of FranGulf Legal and Business Consultants, to explain the changes to the law. Here’s the Q&A.

Can you give us a background on the UAE Bankruptcy Law?

In UAE, the Federal Law by Decree No.9 of 2016 on bankruptcy was implemented to simplify unpaid debts for creditors and to secure debtors from criminal liabilities, in case the debtors are bankrupt. The Bankruptcy Code was well discussed and debated upon its introduction in 2016. Prior to that, global statistics showed that instances of insolvency in the UAE were comparatively more time-consuming and hectic.

Who are subject to the UAE Bankruptcy Law?

The companies situated in UAE, except the ones located within the jurisdiction of Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM) are subject to the Bankruptcy Law or Federal Law No.9 of 2016 in UAE. The legislation only covers companies. Individuals can not declare themselves as insolvent. The law protects the employers, shareholders and the directors.

Who can declare bankruptcy?

Only commercial firms, government-owned companies, Individual traders and non- trader individuals are entitled to enter bankruptcy procedure.

How can the UAE Bankruptcy Law help companies in distress?

Under the bankruptcy law, there are two ways out for companies in distress: 1. Preventative Composition. This option is available to companies facing financial difficulties, but not yet insolvent. 2. Formal Bankruptcy Process. Here, the company directors shall file a case with the local courts.

What amendments were made to the UAE bankruptcy law this year?

The latest amendment exempts certain companies from the provisions of the code with respect to corporate insolvency resolution process. Now, debtors shall be exempted from commencing any complex procedures, such as filing a request to declare bankruptcy. The “emergency situation”, includes emergencies affecting trade or investment such as a pandemic, natural or environmental disaster. This sets up a legal framework and mechanism that enables debtors to get their rights. Under the recent amendments, they just have to file an application that needs to be approved by the competent court. The debtor can resort to a settlement agreement mechanism with creditors. A request for grace period could be made as well. The debtor can also negotiate with creditors to reach an agreement to settle dues that shall be paid before 12 months, unlike before where the agreed dues can’t be settled within three years.

Who can avail of this new debt settlement?

This privilege can only be availed by debtors who defaulted in “emergency situations”.

Why was the bankruptcy law amended?

The amendment to the bankruptcy code is a swift reaction to the pandemic and is aimed at helping companies suffering due to the impact of the pandemic situation. The amendment will also ensure fulfillment of obligations and will enable the creditors to secure their rights.

What is your advice to companies in debt and creditors who want to claim unpaid debt?

Whether you are the debtor or the creditor, do not hesitate to approach your legal consultant for advice. You can also go to he bankruptcy committee to know the proper procedures. ICA/Expat Media
FranGulf Legal and Business Consultants provides labour law lawyer service in Sharjah, Dubai, Abu Dhabi, Ajman, Ras Al Khaimah, Fujairah, and Umm Al Quwain. Get legal advice from our team of experts in the UAE. Email info@frangulf.ae, call +971 585597700 or get in touch via Facebook or Instagram. Expat Media readers get a free 30-minute legal consultation with FranGulf Legal and Business Consultants. Just send a message to Facebook.com/expatmedia starting with the words “Need FranGulf help” plus your name and mobile number. Slots are limited.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